10/07/2015 06:42 BST | Updated 10/07/2016 06:59 BST

Labour Must Stand Up for Workers and Make the Case for a Decent Public Sector Pay Rise

Britain needs a pay rise. That was one of the lines in George Osborne's budget with which we could all agree.

The reality will be very different for the millions of families who are actually seeing their incomes cut as a result of the chancellor's raid on tax credits.

Labour must put forward an alternative to the Conservative approach of squeezing low and middle income families even harder. But you cannot credibly tell businesses that they must dig deep to give their employees a pay rise, and then in the next breathe condemn public sector workers to another five years of real terms pay cuts.

It is time for Labour to stand up for the millions of people in our vital public services who have endured year after year of severe wage restraint and often felt they did not have an effective voice in parliament to fight their corner.

It is not just a basic sense of fairness that should lead us to commit to finding savings so we can pay nurses, teachers and other public sector workers more.

Rewarding and incentivising our public servants is also essential if they are to be effective partners in the drive to make sure services can change to meet the demands that will be placed on them in the years ahead.

Challenges and opportunities created by our ageing society, the explosion of new technologies, and the dizzying speed at which the economies of other countries are developing, means that Britain will go backwards if our schools and hospitals stand still.

The NHS alone has committed to find £22billion of annual efficiencies by delivering health services differently by 2020, requiring an unprecedented 5% year-on-year productivity increase.

Change on that scale is simply not realistic without the active participation of the workforce. Yet the prospect of swallowing further years of real terms pay cuts will leave public servants demoralised and resentful at the very moment they need to be at their most motivated and engaged in the essential task of reform.

The Tories' public sector pay squeeze stands to be a multi-billion pound false economy. If the efficiency savings are not met because the workforce is so demotivated, whoever is Chancellor in 2020 will be forced to choose between tax rises, more borrowing or big cuts to make up the shortfall.

So Labour under my leadership will make the economic case for a decent pay rise for the public sector. To fund it, we will eschew both the traditional Labour approach of more borrowing and the Tory strategy of loading an ever greater burden onto families already struggling to make ends meet.

Instead I will commission a major review to find savings in the £100billion cost of the various tax reliefs that have grown over the year. The cost of accumulated reliefs is higher than the overall cost of in-work benefits, and is not far off the total spent on the whole NHS, yet has had nothing like the same level of scrutiny as either.

There are currently more than 1,000 tax reliefs in operation in Britain today. Those that are needed and work well should be kept, but we will be determined to find savings in those that are poorly targeted and provide an opportunity for tax avoidance.

I have asked Margaret Hodge, who made such an impact as the chair of the public accounts committee in the last parliament, to lead this scrutiny.

It will be an essential part of showing Labour can regain trust on the economy while setting out a clear alternative to a Conservative government whose failure to equip the country for the big changes ahead risks selling Britain short at a time we could be doing so much better.

Liz Kendall is Labour MP for Leicester West and shadow minister for care and older people